Residential building recovery, construction skills shortage & the slingshot effect

27 January 2026

Building recovery continues, but it's still heavily tilted toward houses

The latest ABS Building Activity data shows new residential dwelling commencements continue to rise, reaching their highest levels since March 2022.

Total dwellings commenced

However, the recovery is not evenly spread across housing types. Freestanding houses are being commenced at roughly 1.5 times the rate of apartments, units and townhouses (shown in the graph as “other residential”). While higher-density construction has lifted from recent lows, the gap with detached housing remains significant.

Type of dwelling commenced

Closing this gap will be critical to meeting National Housing Accord targets, which assume a greater share of medium- and high-density housing to support new, well-located homes.

There are early signs that this imbalance may start to narrow. With interest rates still elevated and affordability a key driver, first-home buyers are increasingly targeting more affordable homes, which could help lift commencements in the “other residential” category. If this trend continues — supported by planning reforms and developer responses to demand — the share of apartments and units in the overall housing mix is likely to increase over the year ahead.

Construction industry continues to face critical skills shortage

Australia's unemployment rate dropped to 4.1% in December from 4.3% the previous month, according to seasonally adjusted ABS figures. However, the strong labour market is proving a double-edged sword for the construction sector.

The capacity crunch

Master Builders Australia Chief Economist Shane Garrett said labour shortages continue to plague our industry, limiting the amount of work that can get done. He warned that the tight labour market could also prompt the Reserve Bank to raise interest rates, increasing financing costs for builders and potentially dampening demand.

Urgent reforms needed

Master Builders CEO Denita Wawn emphasized the need for comprehensive workforce solutions, calling for reformed domestic training pathways with stronger apprenticeship support, expanded skilled migration—where construction trades remain significantly under-represented—and reduced licensing and recognition barriers for qualified migrants already in Australia.

"These reforms are critical to ensuring Australia can deliver the infrastructure, housing, and commercial projects needed over the next decade," Ms Wawn said. "Without skilled workers, even approved projects cannot proceed."

Watch for the slingshot effect

Property market analyst John Lindeman makes a compelling case that flat or declining median house prices may mislead investors into thinking the market is weakening. As Lindeman explains, these figures may simply reflect a surge in transactions at the lower end of the market, rather than any decline in the value of quality property.

How it works

Lindeman call this phenomenon the "slingshot effect". When demand shifts toward more affordable homes and suburbs, the median price can fall—even while prices and sales volumes above the median remain firm. But once the lower-priced stock is absorbed, buyers are forced to compete for higher-quality, more expensive properties. At that point, prices can rise rapidly, much like a slingshot being fired.

Why this matters right now

Right now, first home buyer numbers have surged thanks to federal and state schemes including the 5% Deposit Schemee and the Help to Buy scheme. Investors waiting for a further decline in median prices risk missing out. By the time the slingshot fires and headline figures catch up, the best opportunities in quality stock may already be gone.

Brisbane

Decline in Queensland construction productivity has resulted in 77,000 fewer homes

The Queensland Productivity Commission has publicly released its Final Report on Opportunities to Improve Productivity of the Construction Industry in Queensland—and the findings are stark.

The report estimates that construction industry productivity has declined by around 9 per cent since 2018. That equates to 77,000 fewer new homes built in Queensland since 2018 — a number which would be sufficient to address the current shortfall in supply.

Waht's driving the decline?

The Commission identified two primary culprits:

Regulatory burden — burdens cut across land use, building activity and labour markets and seem to explain much of the long run slowdown in construction productivity.

Sub-optimal procurement practices — productivity losses since 2018 have been associated with a growing government capital works program and increasingly interventionist procurement policies.

Government response

The Queensland government has accepted or in-principle agreed to 51 of the report's 64 recommendations, noting that implementation of many reforms is already underway. Their response to the report can be viewed here.

Sales results for the Week

Brisbane recorded 296 sales for the week ending 24 January, including 82 properties that sold for more than $1 million, according to PropTrack's latest auction and sales results. The top sale was 56 Thomas Street, Auchenflower, which sold for $6.4 million.

Listing of the Day

Gold Coast

Sales Results for the Week

The Gold Coast and Northern NSW recorded 191 sales for the week ending 24 January, including 85 properties that achieved prices above $1 million, according to PropTrack's latest auction and sales results. The highest sale was the the sub-penthouse at Mondrian Residences, located at 1902/58 The Esplanade, Burleigh Heads, which sold for $12.5 million.

Ray White's "The Event" sells $105 million worth of homes

Australia’s largest property marketing program once again proved the power of bringing qualified buyers together at the same time to create competition and drive premium results.

Sunday’s The Event 2026 delivered a standout outcome, with $105 million in property sold across 101 auctions, at an average of $1.04 million per home. In a remarkable start, one third of all properties sold prior to auction day, which was followed by an 84% clearance rate on the day.

The top result was a $13 million pre-auction sale for a luxury waterfront home at 5719 Anchorage Terrace, Sanctuary Cove.

Hedges Avenue’s Makeover Continues with New Luxury Apartment Proposal

Plans have been submitted to demolish the no-frills four-unit block at 122 Hedges Avenue, Palm Beach, to make way for a five-storey luxury development featuring four high-end apartments.

Designed by Archidion, the proposed building would include three full-floor apartments and a two-storey penthouse complete with private rooftop pool, sauna, and barbecue area.

The 405m² site last transacted in 2018 for $1.899 million.

Listing of the Day

Sydney

Central Element targets Neutral Bay eith eight-storey apartment build

Central Element has lodged plans for an eight-storey apartment building at 54–64 Barry Street, Neutral Bay. The 1,659m² site was strategically acquired last year following the introduction of the NSW Low and Mid-Rise Housing Reforms and sits on a quiet, tree-lined street within easy walking distance of Neutral Bay village, the Neutral Bay Club, and major public transport links.

The $52 million development, designed by MHNDU, will see the demolition of four detached houses to make way for 45 apartments, including eight affordable housing units to be managed by Bridge Housing. The proposed mix includes six one-bedroom, 24 two-bedroom, and 15 three-bedroom apartments, positioned above three basement levels providing 62 car spaces and 50 bicycle spaces.

Sales Results for the Week

Sydney recorded 1,918 sales over the past seven days, including 558 properties that achieved prices above $1 million, according to PropTrack's latest auction and sales results. The highest sale was 2-4 Tarrant Avenue, Bellevue Hill, which sold at auction for $41 million.

Listing of the Day

Melbourne

Sales results for the Week

Melbourne recorded 554 sales in the past seven days, including 70 properties that sold for more than $1 million, according to PropTrack's latest auction and sales results. The top sale was 267 Amess Street, Carlton North, which sold for $5.8 million.

Listing of the Day

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